The World Trade Organization has ruled that US tariffs imposed on Chinese goods, starting in 2018, violated global trade rules — in a rebuke of Donald Trump’s multiyear commercial confrontation with Beijing.
The decision by a panel of judges from the WTO’s dispute settlement body, which was revealed on Tuesday, found that the US had flouted its commitments to the Geneva-based trade body on several counts when it imposed levies on $360bn of Chinese imports.
The WTO panel ruled that US tariffs were discriminatory and excessive, and Washington did not justify an exemption that would have allowed them. It also rejected the US claim that it was pursuing a settlement with China outside the WTO, saying instead the negotiations between Washington and Beijing were parallel to the legal proceedings.
The US has claimed that the tariffs imposed on Chinese imports over the course of the Trump administration were justified under US law because China had engaged in unfair trade practices by forcing American companies to hand over sensitive technology and stealing their intellectual property.
The ruling is likely to increase the Trump administration’s animosity towards the WTO, which it has frequently threatened to pull out of unless it introduces sweeping reforms to its operations. Robert Lighthizer, the US trade representative, blasted the decision in a statement, saying it confirmed that the WTO was “completely inadequate” to confront China’s “harmful” technology policies.
“Although the panel did not dispute the extensive evidence submitted by the United States of intellectual property theft by China, its decision shows that the WTO provides no remedy for such misconduct,” Mr Lighthizer said.
“The United States must be allowed to defend itself against unfair trade practices, and the Trump administration will not let China use the WTO to take advantage of American workers, businesses, farmers, and ranchers.”
The US could appeal the ruling. However, the appellate body of the WTO’s dispute settlement mechanism is not functioning because the US has failed to approve the nomination of new judges until the institution is reformed.
If Joe Biden, the Democratic presidential nominee, were to win the White House following the November election, the ruling might put him in the awkward spot of choosing whether to keep applying US tariffs that are inconsistent with WTO rules, or remove them, which could be seen as a big concession to Beijing early in his tenure.
Although the US and China struck a “phase one” agreement to halt their escalating trade hostilities in January, the bulk of US tariffs on $360bn of Chinese goods has remained in place.
A 25 per cent levy on $250bn of products from China is still in effect, and as part of the phase one deal, the US agreed to lower tariffs on a further $110bn of goods from 15 per cent to 7.5 per cent.
US and Chinese officials said at the time that they wanted to pursue further negotiations that could lead to greater reductions in tariffs down the road. But relations between Washington and Beijing have soured dramatically since then because of strains over coronavirus, Hong Kong and competition in the global tech industry.